During the divorce process, it is important to understand what property division entails, particularly when it comes to dividing a business.
Here are a few key things to keep in mind.
Determining marital assets
According to the law concerning divorce in Ohio, the courts split assets using equitable distribution. Under this form of distribution, assets are divided by what the court considers fair, with consideration of the parties’ contributions to the marriage and their standing after the marriage ends completely.
When it comes to a business, the courts consider each party’s personal goodwill as a marital asset. Personal goodwill is the value of a party’s skills, work and reputation that contributed to the success of the business. The deciding party forms this value into a percentage and uses it along with the business valuation to determine each party’s rightful claim to the business.
As the name indicates, the business valuation is the dollar value of the company. Parties may choose to determine this amount a few different ways; however, both sides must come to an agreement of the value of the business, or the court may make the final determination. In any case, hiring a valuation expert may be necessary.
If the divorce is amicable and both parties are a part of the daily operation of the business, they may choose to maintain the business as is, though it may be wise to create a new business agreement. On the other hand, should both parties decide to let go of the business, they may sell it and split the profit. In another case, an individual may buy out the ex-spouse, with a lump sum payment, cyclical payments, investments, or stocks and bonds, depending upon the valuation of the business and personal goodwill of the ex-spouse.